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We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do (like Melvin Capital's recent GameStop losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Graham Holdings Co (NYSE:GHC).
Is GHC stock a buy? Graham Holdings Co (NYSE:GHC) investors should be aware of an increase in enthusiasm from smart money of late. Graham Holdings Co (NYSE:GHC) was in 25 hedge funds' portfolios at the end of December. The all time high for this statistic is 28. There were 24 hedge funds in our database with GHC positions at the end of the third quarter. Our calculations also showed that GHC isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here).
Mason Hawkins of Southeastern Asset Management
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Do Hedge Funds Think GHC Is A Good Stock To Buy Now?
At the end of the fourth quarter, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a change of 4% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards GHC over the last 22 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Graham Holdings Co (NYSE:GHC) was held by Southeastern Asset Management, which reported holding $118.3 million worth of stock at the end of December. It was followed by Wallace Capital Management with a $87.4 million position. Other investors bullish on the company included Wallace Capital Management, Madison Avenue Partners, and Renaissance Technologies. In terms of the portfolio weights assigned to each position Madison Avenue Partners allocated the biggest weight to Graham Holdings Co (NYSE:GHC), around 22.08% of its 13F portfolio. Wallace Capital Management is also relatively very bullish on the stock, designating 6.64 percent of its 13F equity portfolio to GHC.
As industrywide interest jumped, some big names have jumped into Graham Holdings Co (NYSE:GHC) headfirst. Balyasny Asset Management, managed by Dmitry Balyasny, created the largest position in Graham Holdings Co (NYSE:GHC). Balyasny Asset Management had $11.5 million invested in the company at the end of the quarter. Chuck Royce's Royce & Associates also initiated a $8.2 million position during the quarter. The other funds with brand new GHC positions are John Hempton's Bronte Capital, Joel Greenblatt's Gotham Asset Management, and Paul Tudor Jones's Tudor Investment Corp.
Let's go over hedge fund activity in other stocks similar to Graham Holdings Co (NYSE:GHC). These stocks are Integer Holdings Corporation (NYSE:ITGR), Hilton Grand Vacations Inc. (NYSE:HGV), Atlas Corp. (NYSE:ATCO), Commscope Holding Company Inc (NASDAQ:COMM), Utz Brands Inc (NYSE:UTZ), LGI Homes Inc (NASDAQ:LGIH), and Arcosa, Inc. (NYSE:ACA). This group of stocks' market values resemble GHC's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ITGR,24,224855,2 HGV,31,759573,-1 ATCO,18,1134798,8 COMM,35,643538,5 UTZ,15,101186,0 LGIH,23,90560,-2 ACA,17,216350,-2 Average,23.3,452980,1.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.3 hedge funds with bullish positions and the average amount invested in these stocks was $453 million. That figure was $502 million in GHC's case. Commscope Holding Company Inc (NASDAQ:COMM) is the most popular stock in this table. On the other hand Utz Brands Inc (NYSE:UTZ) is the least popular one with only 15 bullish hedge fund positions. Graham Holdings Co (NYSE:GHC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for GHC is 57.8. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and still beat the market by 0.9 percentage points. Hedge funds were also right about betting on GHC as the stock returned 21.3% since the end of Q4 (through 4/19) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.